Origination

The market share of refinancings during the week ended May 1 declined slightly but the overall number of applications received increased according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey. The Market Composite Index, an overall measure of mortgage applications, was 979.7, an increase of 2.0% on a seasonally adjusted basis from 960.6 one week earlier. The refinance share of mortgage activity decreased to 74.4% of total applications from 75.3% the previous week. However, the Refinance Index increased 1.2% to 5169.3 from 5108.2 the previous week and the seasonally adjusted Purchase Index increased 5.0% to 264.3 from 251.6 one week earlier. On an unadjusted basis, the MCI increased 2.4% compared with the previous week and increased 43.7% compared with the same week one year earlier. Adjustable-rate mortgages accounted for 2.1% of applications for the second consecutive week, the MBA said. There was an increase in the average contract interest rate for 30-year fixed-rate mortgages to 4.79% from 4.62%, with points (including the origination fee) increasing to 1.17 from 1.14 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.

It could be a challenge for Colonial Bancgroup — the nation's largest warehouse lender — to satisfy some of the conditions attached to a $300 million investment in the bank by a group led by mortgage banker Taylor Bean & Whitaker of Ocala, Fla., according to Fitch. In an interview with National Mortgage News Fitch analyst Kenneth Ritz said "there's a risk the transaction will not go through." Mr. Ritz cautioned that "there have been some positive movements" surrounding the investment by TBW and its unidentified partners. Fitch noted that a number of approvals must first take place including regulatory hurdles and a conversion to a thrift charter. Also, before TBW will invest, there must be solid guarantees that Colonial will, in fact, receive TARP money from the Treasury. The Alabama-based bank saw a net loss of $168 million for the quarter ended March 31. The bank has not reported a profit in the last four quarters. Fitch recently downgraded Colonial's issuer default rating to B- from BB. A Colonial spokeswoman declined to comment on the transaction. A TBW executive did not return a telephone call about the matter. Under terms of the investment, both parties have the right to back out of the transaction if it has not closed by July 31.

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Blaming unrealized mark-to-market losses on derivatives and continuing increases in mortgage insurance defaults, Radian Group Inc., Philadelphia, lost $217.4 million in the first quarter. In the same period last year the MI — the nation's third largest in terms of policies-in-force — earned $196 million. Radian Group chief executive S.A. Ibrahim said in a statement, "We believe that our mortgage insurance franchise remains strong with sufficient capital to continue writing quality new business throughout 2009."

The mortgage markets have responded positively to the Federal Reserve's purchases of GSE debt and mortgage-backed securities, Fed chairman Ben Bernanke said, but mortgage credit is still tight."The decline in mortgage rates has spurred a pickup in refinancing as well as providing support for housing demand. However, the supply of mortgage credit is still relatively tight and mortgage activity remains heavily dependent on the support of government programs and government sponsored enterprises," Mr. Bernanke told the Joint Economic Committee. In his testimony, the Fed chief noted that that the housing market is showing signs of bottoming and sales have been fairly stable for the past few months.

Bank loan officers expect to see continued deterioration in their residential and commercial real estate mortgage portfolios for the rest of this year, according to a periodic survey conducted by the Federal Reserve. The survey of senior loan officers shows that 78% of 50 banks expect delinquencies and charge-offs on prime single-family loans will increase "somewhat" and three are bracing for substantial deterioration. Only 14 banks expect loan quality to stabilize and only two expect some improvement. More than 90% of the banks surveyed see continued deterioration in the performance of CRE loans. Only four banks said loan quality should stabilize or improve. Meanwhile, loan officers reported a "substantial" increase in demand for prime mortgages since the last survey in January. However, demand for CRE loans continue to weaken to the lowest level since 1995 when the Fed first started asking survey questions about CRE lending.

GMAC Financial Services said first quarter residential loan production rose 61% to $13.2 billion on a sequential basis at its mortgage units but declined 29% compared to the same period last year.Meanwhile, 20.79% of its servicing portfolio ($359 billion in receivables) was in some stage of delinquency at the end of March. A year ago it serviced $416 billion in mortgages, 11.73% of which were late. GMAC's home finance division — which includes Residential Capital Corp. — lost $125 million in 1Q, a significant improvement over the same period a year earlier when it dropped $859 million. However, the mortgage group benefited from a $900 million gain due to what it calls "the extinguishment of debt." (ResCap recently renegotiated its debt with bondholders.) GMAC also reported that profit margins "have improved due to higher government production and favorable interest rates." GMAC Financial Services, as a whole, lost $675 million in the quarter, compared to a $589 million loss in 1Q 08.

In yet another sign that depositories are shunning loan brokers and even correspondents, Wells Fargo & Co. said it would no longer fund "low balance" commercial mortgages through third parties.A spokesman for Wells Fargo Home Mortgage said low balance commercial mortgages range in size from $50,000 to $500,000. No annual production figures were available at press time. WFHM will continue to offer the product through its retail channel. Loan brokers have been hurt by a stampede of table funders away from the business, though of late, no wholesaler of size has exited the channel. The spokesman said "We are currently in the process of notifying correspondent and wholesale business channels" about the change. The bank is suspending the program due to "market conditions."

As Triad Guaranty's stock price dropped by 10% to 72 cents per share after Friday's meteoric rise, other mortgage insurance companies saw their stock prices record substantial gains at the close of trading on Monday. Walnut Creek, Calif.-based PMI Group Inc.'s stock went up a whopping 42% to $1.08 per share. MGIC Investment Corp., Milwaukee, ended the day with a stock price of $3.88, up 25% from the day's opening trade. Richmond, Va.-based Genworth Financial's share price went up 14.75% to $2.80 per share. Radian's stock went up 10% to $2.20. The Dow closed at 8426.74 on Monday, up more than 214 points from the day's opening.

PMI Group Inc.'s stock price shot up 34.2% Monday morning as the Dow rose 168 points to 8380.5. Though not nearly as dramatic as Triad Guaranty's meteoric leap in stock price on Friday, the Walnut Creek, Calif.-based mortgage insurer saw its share price go up to $1.02 a share on Monday morning. In late March, PMI Group announced that, due to losses in the U.S. mortgage insurance business eating into its net assets, it was seeking new capital.